Faster recovery for NJ’s Gold Coast

New Jersey’s Gold Coast is getting back some of its real estate
mojo as the market picks up. In this month’s Q & A, brokers,
developers and analysts told The Real Deal that the market in
the area — which encompasses a string of towns along the Hudson River,
including Hoboken, Weehawken, Jersey City and West New York — has seen
a drastic improvement in the last couple of months.

While the market doesn’t resemble the crazy days of the boom in
terms of prices, financing or pace of sales, Hudson County is actually
outperforming the rest of the Garden State in its rebound.

The county, analyst Jeffrey Otteau said, has seen a 47 percent
increase in number of sales and a 14.6 percent increase in median price
so far in 2010. That compares to a 24 percent sales increase and a 1.4 percent price increase in the rest of New Jersey.

Some of the new development projects in Gold Coast towns,
especially Jersey City, are also benefiting from the new (and more
frugal) economic shift that’s taken place. While New Yorkers have
always looked across the river for deals, brokers said the number of
Manhattanites and Brooklynites looking for cheaper properties there has
sharply risen recently.

Still, there is some concern that the activity surge of the last
couple of months may have been artificially fueled by the $8,000
homebuyer tax credit that has now expired. The fear is that those
buyers may now disappear.

And there is still a glut of inventory in some areas. But brokers
say a tighter lending climate has limited new condo construction so
much that supply and demand are finally coming into balance.

For more on which Gold Coast towns are doing best, where buyers are
coming from and how brokers are faring, we turn to our panel of
experts.

The market has started picking up a bit in New York City in the
last few months. Is the same happening in Jersey City, Hoboken, West
New York and the other Gold Coast New Jersey towns?

I can speak about Jersey City and Hoboken. And yes, sales have
picked up. Sales in our office are probably up 80 percent versus 2009.
There were a lot of small offices that went out of business in Jersey
City as well as in Hoboken in 2009.

What sorts of properties are buyers looking to purchase these days?

I’d say probably 90 percent of our sales are resales and new
development. Our buyers are out there looking at medium- to high-priced
condos — two-bedrooms anywhere from 1,100 to 1,300 square feet in the
area for between $550,000 and $750,000. One-bedrooms, averaging about
800 square feet, are on the market for anywhere from $400,000 to
$500,000. The Gold Coast is relatively new, so a lot of the resales are
probably in buildings that are no older than five or six years.

What sorts of buyers are you seeing? What industries are they coming from and where are they moving from geographically?

I think right now our agents are dealing mostly with families who
are in smaller apartments in Manhattan and see they can get a lot more
value for their money out here. Some are moving from Brooklyn. Many who
come here have looked at properties in Brooklyn.

Lisa Poggi

senior managing director, DE Worldwide Consulting

Your firm is marketing the Hudson Club at Port Imperial in West New York. What have you been seeing in the market recently?

The quality of the traffic has improved. There has been much more
interest in the higher-priced homes lately, and more often than not,
prospective purchasers are prequalified walking through the door. The
large majority of our prospective purchasers are looking for homes with
views in the $600,000 to $800,000 range. Last year, most buyers were in
the $400,000 to $600,000 range.

What are residential prices like in the area now compared to three months ago, six months ago, a year ago and during the boom?

Prices now are fairly aggressive. For the most part, we have seen a
continuous drop in prices from quarter to quarter since 2008. Just
recently, surrounding areas have begun to see prices firm up and even
increase slightly. This has been a very good indication that we have
hit the bottom. Since the boom, prices are down approximately 30 to 35
percent.

What about the pace of sales? How long is it taking to sell a
property now compared to three months ago, six months ago, a year ago
and during the boom?

The pace of sales has increased dramatically. Recently we’ve had
sales with single visits — although that’s still uncommon. Most sales
require two or three visits over a month.

We know the luxury market has suffered everywhere. How is the luxury market in the area doing compared to the other sectors?

The luxury market seems to be picking up this year. We are seeing much less traffic in the low-end market.

Michael Skea

director of operations, Lennar Urban

Are you seeing the market pick up in New Jersey’s Gold Coast towns?

At the end of April I started noticing a pretty dramatic
improvement. We have written six contracts here in the last six weeks
— double what our absorption typically is. During the economic
downturn we would write one deal a month.

What are some of the latest trends you’re seeing in the residential market in the area?

Over the last two years folks who threw out a lowball offer
expected some type of counteroffer. Since the end of April … I have not
had to contend with responding to those lowball offers. When they have
[increased] their offer to something that’s reasonable, where we can
start negotiating, I ask them to please be back in touch.

What sorts of buyers are you seeing?

The majority are somehow intertwined in the financial sector. They
are involved in banking, stocks and commodities, among other areas.
Also, more than half of our buyers are young couples about to start
families, looking for an alternative to living in Manhattan at a price
they can afford.

How is the luxury market in the area? And have any projects
scaled back on luxury finishes or amenities to reduce prices for both
developers and buyers?

In [one of our] most recent buildings my standard appliance package
would have been a Viking package, [but] it’s now a high-end KitchenAid
package. It’s not a dramatic cutback and it hasn’t made any difference
to the people purchasing, but it has assisted in providing a more
reasonable price.

Jeffrey Otteau

president, Otteau Valuation Group

Are you seeing the market pick up in the Gold Coast New Jersey towns?

Yes. The year-to-date increase in housing sales for Hudson County
is the largest in the state — it’s a 47 percent rise this year. This
compares with a statewide increase of 24 percent, so Hudson County is
setting the pace.

What are some of the latest trends you’re seeing in the residential market in the area?

The improvements this year are across all market segments. Sales
have been increasing for both lower-priced and luxury-priced property,
and the rental market has bottomed out and is set to enter a recovery
phase.

What are the biggest challenges of selling in New Jersey’s Gold Coast towns right now?

The lack of significant job creation coupled with stricter loan
underwriting standards is creating a drag on the pace of recovery.

What are residential prices like in the area now compared to six months ago and a year ago?

Median home prices in Hudson County rose 14.6 percent in the first
quarter, compared to a year ago. This compares to a statewide rise of
1.4 percent. This doesn’t mean that individual property values rose by
that amount, because the mix of median prices changes from one year to
another. It is an indication, however, that a rebound is occurring.

What about the pace of sales? How long is it taking to sell a
property now compared to three months ago, six months ago, a year ago
and during the boom?

Unsold inventory has fallen from 14 months of sales at the
beginning of the year down to eight months today, reflecting a 43
percent reduction. This doesn’t mean it takes that long to sell a home
that is priced right, [which] would take much less time.

How is the luxury market in the area doing compared to the other sectors?

While the overall market in Hudson County holds eight months of
unsold inventory, homes priced between $1 million and $2.5 million have
10 months. But such measurements don’t capture the fact that you get
much more for your million dollars than several years ago. Over the
long term, luxury housing demand will stem from the strength of the
Manhattan luxury market and New Jersey’s ability to attract high-paying
jobs into places like Jersey City. So far, neither is occurring to a
significant extent.

What about banks? Have they become more receptive to selling their interest in failed condos for a loss?

So far the trend of holding troubled assets is continuing, with
very few distressed bulk sales occurring. This will likely change as an
improved economy improves bank balance sheets, which will open the door
to moving some of the troubled assets.

What’s going on with brokers in the area? Are there fewer brokers selling there?

Yes, the number of licensed real estate agents and brokers has
declined about 10 percent from the peak due to reduced transaction
volume. Looking ahead, this will likely continue even as the market
improves due to continuing-education requirements in New Jersey, which
kick in this year.

Jacqueline Urgo

president, the Marketing Directors

Your firm represents a bunch of New Jersey’s Gold Coast
properties, including Crystal Point and Gull’s Cove in Jersey City, the
W Hoboken Hotel & Residences in Hoboken, and Henley on Hudson at
Port Imperial in Weehawken. Have you seen activity pick up recently?

Activity in the second quarter is stronger than it has been in the
last year and a half, and all signs predict a strong summer. From April1 to June 11, we’ve [had] nearly 60 sponsor sales in Hudson County.

What are the biggest challenges of selling real estate in New
Jersey’s Gold Coast towns now, and how do those challenges differ from
three months ago, six months ago and a year ago?

Securing end-loan financing for buyers has been a challenge in
every market, but financing has eased up of late and there are new
outlets available. Preselling far in advance of delivery remains
difficult; so much of the sales we’re facilitating are in properties
with immediate or near-delivery dates.

What are residential prices like in the area now compared to three months ago, six months ago, a year ago and during the boom?

Pricing is down approximately 30 percent from the height of the
market, but is tightening now and, in some cases, increasing. The
quality of traffic has improved, buyers are moving ahead with
purchases, and absorption is being achieved. At Crystal Point in Jersey
City, we’ve sold 37 homes from April 1
to June 11. That level of velocity would have been welcomed even before
the downturn. We now have over 100 of the 269 residences closed.

What is the most surprising thing about the market in the area right now?

We’re seeing a definitive uptick in the number of buyers coming
from New York City. The Gold Coast has always attracted a percentage of
buyers from across the river, but that proportion is clearly on the
rise as comparable amenities at lower price points has taken on new
significance in today’s market.

What sorts of properties are buyers looking to purchase these days?

New construction continues to dominate. Foreclosures and short
sales appeal to a small segment of the market, which is essentially
only interested in the bottom-line number.

George Filopoulos

president, Metrovest Equities

What are the biggest challenges of selling right now in the New Jersey Gold Coast area?

There is a fair amount of unsold inventory, particularly in Jersey
City. However, there has been very little new condo construction
recently due to difficulty in financing over the last three years. This
will bring supply and demand in line fairly soon.

Your firm is developing and selling the Beacon in Jersey City, a
major residential restoration project. Can you give us an example of a
recent deal that illustrates what’s going on in New Jersey’s Gold Coast
market?

We recently sold a 3,000-square-foot loft [at the Mercury Lofts at
the Beacon] for approximately $1 million to a couple currently renting
in Tribeca. Their cost of ownership is significantly less than the rent
they were paying for an apartment less than half the size.

Scott Selleck

broker/sales associate, RE/MAX Villa Realtors, Edgewater office

Are you seeing the market pick up in Gold Coast New Jersey towns?

I’ve seen the market picking up, but it depends on the price point.
In my market from Weehawken north of the Lincoln Tunnel to the George
Washington Bridge, units seem to be moving better under $600,000. I
just put [a two-bedroom] under contract there for $500,000 that two
years ago would have sold for $650,000. When I did average statistics
for two-bedrooms [selling] along River Road it came out to an average
of $565,000 to $575,000. One-bedrooms seemed to be going under
$400,000. One of the biggest reasons [for the uptick] was the deadline
for the $8,000 tax credit for buyers, so there was a surge in the
second quarter to get those under contract.

What are the biggest challenges of selling real estate in New Jersey’s Gold Coast towns right now?

There are a lot of units that are discounted by developers. As a
result, sellers with conventional properties are competing against
them. The bigger issue is that the larger the building and the more
amenities, the higher the taxes and maintenance. Also, right now buyers
don’t have the incentive for the tax credit. There’s a fear that a
drop-off is coming.

How long is it taking to sell a property now compared to three months ago, six months ago, a year ago and during the boom?

It all comes down to pricing. It takes four to six months to sell a
unit that in the boom could have sold in 30 to 90 days. There is a bit
of a misconception in the market that because there are short sales and
REOs, buyers can get a steal on anything. The seller purchased the
units at a certain price point and they want to break even at least or
make some type of profit. On the waterfront, an owner that bought
within the last four years has likely lost money. [There are new
projects where] 80 percent of sales were short sales. Part of the
reason is the tax and the maintenance. Buyers bought in the last four
years thinking they were going to resell, and they were upside down.

Is there more interest in new properties than resale?

If it’s priced right, new developments have stronger interest, but
that depends on the tax formula and how high the maintenance is. It can
be more advantageous because the builder is offering incentives. If
they are giving it to you for a steal, there’s a reason for it.

There are a lot of new projects in the area, like Trump Plaza Jersey City and Crystal Point. How are they doing now?

Crystal Point sold really well, but for their last few units they
kept the prices higher and are struggling to finish. When there was a
range of pricing they were moving along much quicker. Maybe they have
their biggest high-end units left to sell, and sometimes those
million-dollar-plus units don’t move as fast on the Gold Coast as units
$800,000 and below do. The Trump project is a huge building with a lot
of options for people; it’s not a bad value.

What sorts of properties are buyers looking to purchase these days? Resales? New development? Foreclosures? Short sales?

It’s a little bit of everything. A short sale is not an easy sale
to do because it takes a certain type of buyer that can wait six to
eight months as the banks go through the process. An REO is all cash;
that’s an investor type of buyer. You would be amazed how many one- to
four-family homes under $300,000 there are in Jersey City. Buyers are
picking off these homes. I have two two-family homes under contract
right now for $75,000 each, all cash. The buyers are updating them and
will sell for $250,000. Condos and townhouses under $650,000 to
$700,000 seem to be moving better.

What sorts of buyers are you seeing? What industries are they coming from and where are they moving from geographically?

I work with a lot of buyers who work in NYC in the Financial
District; a lot of dual-income couples too. They are very focused on
transportation access. They check the commute before they buy.
Waterfront means very easy access to the city. There is more of a
migration off the waterfront when they start families.

What’s going on with brokers in the area? Are there fewer brokers selling there?

I’m sure there are fewer. It is harder to make a full-time living
in real estate this time around than in the past. The better agents are
left and really have to work. [Still,] sellers are also willing to pay
5 to 6 percent commissions now. When it was a hot market they wanted 4
percent because anyone could sell the place. They don’t fight the
commission because they have to get it done.